Plaintiffs suing Chrysler over its “clean diesel” engines may pursue racketeering claims, according to a federal judge’s ruling.
In a decision on Thursday, U.S. District Judge Edward Chen refused to dismiss the multidistrict litigation in the Northern District of California, concluding that plaintiffs who had purchased Chrysler’s Jeep Grand Cherokee SUVs and Dodge Ram 1500 pickups with “EcoDiesel” engines could pursue claims under the U.S. Racketeer Influenced and Corrupt Organizations Act. In particular, he found that plaintiffs had alleged sufficient facts that Fiat Chrysler AV and parts supplier Robert Bosch GmbH had conspired to fraud regulators about their “clean diesel” vehicles, for which consumers then overpaid.
“By deceiving regulators, Defendants were able to sell Class Vehicles that emitted NOx at levels up to 20 times [the] legal limits and that contained one or more defeat devices,” Chen wrote. “This deceit plausibly caused Plaintiffs to overpay for the defective Class Vehicles by an amount directly attributable to the alleged wrongful conduct of the Defendants.”
Elizabeth Cabraser, lead counsel in the Chrysler MDL, said the ruling would give “a green light to our claims.”
“We will continue to hold Fiat and Bosch accountable for the economic and environmental harm they caused,” wrote Cabraser, of San Francisco’s Lieff, Cabraser, Heimann & Bernstein. “Fiat Chrysler cheated U.S. emissions tests and emitted harmful pollutants at illegally high levels far in excess of what would be considered environmentally-friendly. Struggling to compete in the U.S. ‘clean’ diesel market, Fiat like Volkswagen fought dirty and concealed their illegal emissions software from regulators and consumers alike. In fact, Plaintiffs’ on road testing revealed that the Class vehicles produced NOX over 20 times the legal limits. Defendants’ cheating didn’t stop with the regulators; evasion of emissions standards was simply the gateway to cheating consumers, who paid many thousands of dollars for ‘eco’ vehicles that were anything but. When Defendants cheated, consumers paid the price.”
Robert Giuffra, a partner at New York’s Sullivan & Cromwell, represented Chrysler, CEO Sergio Marchionne and a unit that manufactured the engines. He declined to comment. (He also represented Volkswagen in its emissions case.)
Bosch attorney Matthew Slater of Cleary Gottlieb Steen & Hamilton in Washington, D.C., did not respond to a request for comment.
Chen’s ruling comes a month after U.S. District Judge Thomas Ludington of the Eastern District of Michigan refused to dismiss a similar case against General Motors and Bosch over diesel trucks. Both decisions come in cases filed in the wake of a $14.7 billion settlement in 2016 with Volkswagen.
Unlike Volkswagen, other automakers haven’t admitted that they installed emissions-cheating devices in their vehicles. They have brought motions to dismiss based largely on standing and federal pre-emption grounds. In the Chrysler case, Chen appointed Kenneth Feinberg as settlement master to resolve the litigation. One of the lawsuits also is a case the U.S. Department of Justice brought against Chrysler, though it was not affected by last week’s ruling.
Chen cited the GM decision several times in his ruling. In the GM case, Ludington had acknowledged that other courts had found future damages or profits too speculative to uphold RICO claims but noted that plaintiffs in his case had alleged financial injuries that occurred at the time consumers bought the cars—about $9,000 over what they would have paid for a comparable gas car.
Chen, in the Chrysler case, came to a similar conclusion. Plaintiffs in the Chrysler case had alleged they paid between $3,120 and $5,000 more for the “EcoDiesel” vehicles. “Plaintiffs also allege that they did not receive cars that actually performed as EcoDiesels, which, when considered along with the alleged premium, plausibly supports that they paid more than fair market value for the Class Vehicles,” he wrote.
He also denied Bosch’s motion to dismiss on similar grounds of standing.
“The Bosch Defendants played a role in designing the accused device that caused vehicles to perform in a way that deceived consumers and regulators, and allegedly did so knowingly and purposefully as part of a conspiracy with the other Defendants,” Chen wrote. “The injuries suffered by Plaintiffs are sufficiently traceable to the Bosch Defendants.”
Chen also largely upheld consumer fraud claims and warranty-based claims. But he questioned what advertising or other statements consumers relied on, apart from an “EcoDiesel” logo with a leaf and green coloring.
“This is unsurprising,” Giuffra wrote in Chrysler’s motion to dismiss, “given that the marketing materials Plaintiffs reference in the Complaint—unlike the advertisements in the Volkswagen Complaint—do not depict a nationwide, consumer-focused ad campaign whose primary focus was emissions.”
Plaintiffs are due to file their motion for class certification on April 16.